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Breakouts and fakeouts in FOREX

When trading breakouts on support and resistance zones, more often than not, you will experience fakeout instead of breakout.

In extremely volatile forex market, fakeouts are more frequent and more likely than breakouts. Before breakout from trading range, fakeouts can be observed. Those are disaster for beginning forex trader. On the other hand, professional traders love them.

Breakouts and fakeouts in FOREX

Multiple fakeouts before true price range breakout (of support)

How to trade on breakout and fakeout in forex

For the best results, trade with professional ECN/STP broker with MT4. If you can't trade with profit. Automatically copy the traders that are already profitable.

Experienced forex traders will often times choose to trade against breakout. Expecting it, to be just a fakeout. They place stop loss just above maximum reached after the breakout. They are betting on price returning back to the opposite border of the trading range.

By using tight stop loss, those are low risk, high reward trades. Fakeout forex traders can be correct just 50 percent of time and still be in the profit (how to trade forex fakeout strategy). Learn to understand and trade breakouts (forex breakout strategy).

To be able to better distinguish between fakeout and breakout, consider following:

Breakouts and fakeouts in FOREX

Low volume (forex volumes indicator) on fakeouts, high volume on breakout.

  • Supports and resistance levels on higher timeframes. Breakout on 1H timeframe while there is massive support above the price in 4H timeframe is more likely to be a fakout.

  • Consider volumes forex indicator. True breakouts are accompanied with high volume, while fakeouts are usually low volume events.

  • Consider momentum indicators such as ADX and MACD in similar fashion as volumes. Growing momentum as the price approaches S/R signalizes that forex market is strong enough to break S/R and vice versa.

ABOUT US

THEFOREXKINGS

“Trading FOREX since 2006. Full time trader and web developer since 2013. My two biggest hobbies are trading and web development. In TheForexKings I managed to connect both of them. Even after 12 years of trading I still have the same passion for the market as at the beginning. The aspect I enjoy the most : development and testing of new ideas.” 

 

Only in 2016 - 2017 we have created more than 400 forex strategies. During this period we have also developed and published +200 MT4 Expert advisors based on those strategies. We are dedicated to provide you with viable and complete trading systems that have thrived in extensive historical testing. We want to give you complete and transparent trading solutions, that once mastered ,will set you financially free. We want to give you a fighting and winning chance in the market. ” 

—  Marian, Proprietor of TheForexkings.com

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